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2016: The Scene Is Set

A good rule of thumb to live by is to believe nothing you’re told and only half of what you see with your own eyes. That might sound cynical, but it’s kept me out of trouble more than once.

This is particularly relevant today when considering inflation. We’re constantly told there isn’t any inflation or it’s so low the Federal Reserve could not possibly raise interest rates.

What a load of bunk!

For those of us who live in the real world, we know this is bogus. We’re getting our clocks cleaned by higher prices and stagnant wages. And Social Security recipients are being outright cheated with their 0% inflation increase for next year.

Gas prices are down, but food prices are through the roof! (That’s why one of our recent short targets in Forensic Investoris a food producer. It’s seen prices skyrocket but its profitability dwindles by out-of-control costs.)
Tuition costs are skyrocketing! The College Board projects that by 2033 it will cost almost $324,000 to attend a private university. How is that even remotely justifiable… or affordable for that matter?

Health care costs are out of control! And I’ve felt the sting of this recently (I know Rodney has as well, because he’s complained about this lately too)…

The other day I opened my mail to see that my health insurance coverage will remain intact. It will, but I was none-too-pleased to see that my premium is going up by 24.33%! That’s crazy. Fortunately, I’m healthy and have negligible doctor bills. Unfortunately, that means I’m paying 24% more for coverage I’ll likely not even use.

You’ll agree with me on this: money doesn’t grow on trees. My health care bill has gone from being a relatively minor expense two years ago to the largest monthly cash outlay in my business.

Seventy percent of the U.S. economy is consumption based. When no one has any money left to buy anything, it’s going to eventually filter its way through the economy. And I’m afraid we’re already seeing the effects. Corporate revenues and earnings are getting pinched hard this quarter. This trend will continue.

2016 is setting itself up to be a year to remember… and not in a good way. Look to preserve capital wherever possible. Then, grow that capital with strategies like the one I use in Forensic Investor.
Best,

“Market bubbles are often a mass delusion, where investors wrongly assume that prices move in only one direction – UP! And nowhere is this delusion clearer than in real estate,” says economist… Read More>>

In 2007, John Del Vecchio managed a short only portfolio for Ranger Alternatives, L.P. which was later converted into the AdvisorShares Ranger Equity Bear ETF in 2011. Mr. Del Vecchio also launched an earnings quality index used for the Forensic Accounting ETF. He is the co-author of What's Behind the Numbers? A Guide to Exposing Financial Chicanery and Avoiding Huge Losses in Your Portfolio. Previously, he worked for renowned forensic accountant Dr. Howard Schilit, as well as short seller David Tice.